Social Development Minister Carmel Sepuloni said the changes started under the previous National government. Photo / Mark Mitchell
The Government is prosecuting 90 per cent fewer people for benefit fraud than it was five years ago.
It accompanies a drop of more than 80 per cent fewer investigations into benefit overpayments, the value recovered dropping from $48.8m to $12.3m.
The Ministry of Social Development says it stems from an early intervention and less punitive approach adopted by the former National-led government in 2015, and continued in line with recommendations of the Welfare Expert Advisory Group.
The Act Party says it is further evidence of Labour going "soft" on beneficiaries, while beneficiary advocates welcome the more "empathetic" approach they say has led to more trust in the system from beneficiaries.
From 2015/2016, the number of successful prosecutions has dropped from 594 to 63 in the year to June 2020.
The number of investigations has dropped from 3333 to 693.
Meanwhile, the value of investigations completed into benefit overpayments has dropped from $48.8m to $12.3m over the same five-year period.
The value of prosecutions has dropped from $24m to $3.7m.
Social Development Minister Carmel Sepuloni said the changes correlated with a new fraud prevention strategy introduced under the National government in 2015.
The 2015 changes introduced "non-investigative approaches" to lower-risk allegations of fraud, and a prosecution panel to decide on serious cases.
"Ministry of Social Development (MSD) now intervenes early when concerns are raised, to make it easy for clients to do the right thing and avoid unnecessary overpayments and debt while still responding appropriately to serious fraud," Sepuloni said.
Investigations in recent years had also been affected by the Privacy Commissioner's inquiry in 2019, which meant pausing and reassessing investigations and prosecutions briefly, and Covid-19.
The process involved a three-tier model starting on early intervention, described as "a light touch response to discuss any integrity issues raised, confirm obligations, and adjust entitlements where appropriate".
The next step was working more intensively with a client to assess their situation against their entitlements and adjust entitlements where necessary, including overpayments.
The last step was investigation, gathering information and acting on serious client integrity issues, which could result in an overpayment and in the most serious cases prosecution.
Overall, the number of cases responded to has remained stable over the last five years but a greater proportion did not involve investigation nor prosecution, Sepuloni said.
Those that led to prosecution had a conviction rate of 98 per cent in the year ending June 2020.
"The Government has kept the policy instituted under the previous Government," Sepuloni said.
"It has led to more early interventions and supports fraud prevention. It's an approach that was endorsed by the Welfare Expert Advisory Group and one I support."
Act's justice spokeswoman Nicole McKee said it seemed the Government had "given up" on prosecuting fraudsters.
She said prosecution rates would drop even further for the coming year with MSD staff pulled off their normal duties to work on investigations into the Covid-19 wage subsidy.
"On top of that, MSD has had to pause other investigations into fraud while it is being investigated by the Privacy Commission," she said.
"This Government has already gone soft on beneficiaries and it's about to go a whole lot softer thanks to its own privacy issues and its handling of the wage subsidy."
Victoria University of Wellington Professor of Taxation Dr Lisa Marriott said the change in approach from MSD was "much-needed".
There was little evidence to suggest increased compliance was achieved by more prosecutions, especially given Inland Revenue had not adopted the same approach to tax evasion, she said.
"It is hard to interpret the [previous] approach as anything other than isolating a vulnerable part of the population for more punitive treatment without justification."
Four years ago Marriott's research found much higher rates of investigation for welfare fraud compared to tax evasion.
About 600 to 900 people were prosecuted a year for welfare fraud and there were 60 to 80 prosecutions of tax evaders.
The 2019/2020 prosecution rates now aligned MSD closely with Inland Revenue. There were 58 prosecutions in 2019/2020.
However, Marriott said it was still "problematic" MSD included identifying overpayments in investigation as a performance measure because it "removes an incentive for MSD staff to take a less punitive approach where applicable".
Beneficiary advocate Kay Brereton said the change in approach had led to people being more open about any mistakes in overpayments.
Most investigations related to people being in relationships and receiving the wrong benefit amount, she said.
By nature it was difficult to determine exactly how serious a relationship was in the beginning, and so some people would put off telling MSD of their change in living situation, she said.
However the longer it was left, the higher the debt and the greater the fear was of consequences.
"People are really scared of having made any mistakes," she said.
"But with MSD taking an early intervention approach, we are finding investigators saying they probably should have told them earlier but then making the adjustment.
"It is a huge weight off their shoulders, no matter how small the debt as they would have been living with this enormous stress.
"And those positive outcomes make them much more trusting of the Government and willing to come forward if there are any errors in the future."
Brereton said she'd also heard MSD staff enjoyed being able to use more discretion and be more "empathetic".
"It will take time to see if there has been a culture change, and see if those rates have changed without impacts of the pandemic.
"But this is hopeful, and looks like there is a focus on intent and the resources are going into those out there deliberately committing fraud.
"The low level offending is people just trying to survive. They are not out there making lots of money, just enough for themselves and their kids to survive."
Auckland Action Against Poverty's Brooke Stanley Pao said they welcomed the change in approach which meant MSD was not "further punishing people for trying to survive".
"The benefits to this approach means people, often single mothers, aren't being put under further stress for trying to survive a system that punishes them for seeking solace in relationships.
"It's easier and more humane for us to treat people within our system with respect and dignity, and this process highlights how sexist and racist the rules really are."